Plugging gaps in payment systems: Evidence from the take‐up of new Medicare billing codes

Abstract We analyze the introduction of new Medicare billing codes for Chronic Care Management (CCM) and Transitional Care Management (TCM). We first show that new code take‐up occurs gradually and varies across space and physician characteristics. Second, we study how the codes correlate with other services, focusing on two case studies. Illustrating code substitution, we show TCM services predict fewer traditional office visits following hospital discharges, suggesting crowd out. Illustrating code complementarity, we show TCM and CCM services predict increases in annual wellness visits. Take‐up frictions and the relationship between new and existing codes are important for evaluating payment reforms.